BMI View: Recent developments in the country's economic and business environment outlooks add further weight to our positive view on Vietnam's agribusiness sector. The industry holds strong growth opportunities in terms of production, exports and retail sales, particularly with regard to the rice, coffee, livestock and dairy sectors. Moreover, the upcoming economic and financial integration in South East Asia will benefit Vietnam's exports of rice, dairy and coffee. However, Vietnam is facing growing competition in its key markets . T he fulfilment of its promising potential will only be achieved if the country steps up its competitiveness and improves both product quality and supply chain efficiency. Vietnam will have to significantly ramp up investments on crop productivity in order to not be left behind and , if it does, it will be able to produce more value-added crops and maintain its status as an export spearhead.
|Agribusiness Market Value|
|BMI Market Value By Commodity (2011-2019)|
Rice consumption growth to 2019: 10.4% to 23.6mn tonnes. Rice remains the major food staple in Vietnam and we do not see this changing over our forecast period. However, rising interest in other foods such as wheat-based goods - supported by growing affluence - will restrict demand for rice and, over the forecast period, we expect production growth to significantly outpace that of consumption.
Corn production growth to 2018/19: 30.2% to 6.7mn tonnes. Although acreage is likely to remain stagnant or diminish, current yield immaturity means significant gains are still available via this avenue, especially as robust local corn prices provide incentives to farmers. Domestic consumption will be another important driver.
Milk production growth to 2018/19: 62.2% to 79 5,7 00 tonnes. Dramatic increases in cattle numbers and increased public and private sector investment - part of the effort to reduce the country's growing import dependency - will be the main boost to growth. Commercialisation will also play a key role as larger, more efficient farms come to play a greater role in milk production.
2015 BMI universe agribusiness market value: USD37.5bn (down 1.3% from USD37.9bn in 2014; growth expected to average 2.3% annually between 2015 and 2019).
2015 real GDP growth: 6.4% (up from 6.0% in 2014; predicted to average 6.4% over 2015-2019).
201 5 consumer price index: 2.1 % year-on-year (y-o-y) average (up from 4.1% in 2014; predicted to average 4.1% over 2015-2019).
2015 central bank policy rate: 6.00% (down from 6.50% in 2014; predicted to average 6.00% over 2015-2019).
Vietnam's coffee sector is undergoing some positive changes which will help the country maintain its status as the largest exporter of robusta coffee globally in the coming years. The Ministry of Agriculture (MARD) has unveiled a coffee plan for the 2014-2020 period, focusing mainly on a tree replanting programme and on the development of the processing sector. However, we believe the implementation of the recently unveiled coffee plan will be slow and the government's goal to boost value-added coffee exports will be difficult to achieve. In particular, the replanting programme may be partly jeopardised by the low competitiveness of coffee prices relative to other crops, including pepper.
After decades of active support to the rice sector, Vietnam is shifting its attention to corn and soybean production in order to address its soaring animal feed deficit and to avoid rice oversupply. A year into the new policy incentivising farmers to switch to corn and soybean production, rice output growth has actually shown signs of slowing down, while corn production is picking up. The eventual increase in domestic feed output is likely to favour the development of the livestock sector.
Due to the decline in exportable supply and fiercer competition from Vietnam's traditional competitors, Vietnamese rice exports will broadly stagnate in 2014/15 and 2015/16 compared with the five-year average. Thailand ended its rice scheme in 2014, which resulted in a drop of Thai rice export prices. The return of Thailand on international markets will strongly limit Vietnam's rice exports in 2015. In the longer term, Vietnam will continue to gain competitiveness and eat into Thailand's market share. The integration of the ASEAN countries also bodes well for Vietnam's rice exports.
Vietnam is seeing a wave of private investment in its upstream (farming) and downstream (dairy product manufacturing and distribution) dairy sector. These investments bode well for the future of Vietnam's milk production in the coming years. Vinamilk, Vietnam's largest dairy company, is one of the most active in terms of investment. Vietnamese companies operating in sectors other than diary are also turning their eyes to the milk industry, including Vinacafe Bien Hoa Company and property developer Hoang Anh Gia Lai Group. However, the wave of private investment in Vietnam's dairy sector also has its downsides, the main one being the rise in competition. Growth in domestic dairy prices has slowed down and margins in the sector have been on a downtrend since 2013.